South Australian Household Final Consumption Expenditure (Feature Article)

FEATURE ARTICLE: SOUTH AUSTRALIAN HOUSEHOLD FINAL CONSUMPTION EXPENDITURE

INTRODUCTION

Between the September quarter 2007 and the September quarter 2008, the Automotive fuel class of the Consumer Price Index (CPI) increased 26.0% in Adelaide. This article looks at Household Final Consumption Expenditure (HFCE) of South Australians during this period. The article looks at HFCE on items such as Operation of vehicles, Transport services and Purchase of vehicles and analyses whether there was a change in spending trends on these items during the period of increasing fuel costs.

HFCE measures all current expenditures, particularly purchases of goods and services, by all households and non-profit institutions serving households. For ease of comparison, and to account for population differences and changes, the HFCE data are presented in this article on a per person basis, using the Estimated Resident Population for the relevant period. At the time of writing, the ERP for the September quarter 2008 was not available hence estimates for this quarter were extrapolated using the average of the quarterly percentage changes for the previous sixteen quarters (i.e. September 2004 - June 2008). As shown in this article, total HFCE per person for South Australia increased 1.4% between the September quarter 2007 and the September quarter 2008, compared to a national decrease of 0.1%.

AUTOMOTIVE FUEL PRICE INDEX

In recent years the price that householders pay for automotive fuel has shown periods of sharp rise as a result of international increases in the price of crude oil. The Automotive fuel component of the CPI rose sharply after the March quarter 2005 and again after the September quarter 2007. The first rise peaked in the June quarter 2006 while the second was still evident in the September quarter 2008. Between the September quarter 2007 and the September quarter 2008, the index for Automotive fuel in Adelaide increased by 26.0%, and the increase for the eight capital cities was 25.4%.

CPI: Automotive Fuel Expenditure Class, Original

HOUSEHOLD FINAL CONSUMPTION EXPENDITURE

Per person HFCE increased steadily in both Australia and South Australia to the end of 2007. After peaking in the March quarter 2008, Australian per capita HFCE has fallen 0.6% (in chain volume trend terms) resulting in the estimate for the September quarter 2008 being 0.1% lower than the level of the September quarter 2007. While per capita HFCE in South Australia has also started to decline, the estimate for the September quarter 2008 remains 1.4% above the level of the September quarter 2007.

Per Capita HFCE, Chain Volume, Trend

As noted above, the South Australian and Australian trends in total HFCE per person evolved differently after the September quarter 2007 and into the September quarter 2008. The main contributors to this difference can be identified in the following table. Of particular interest in the context of increasing automotive fuel prices are the expenses related to transport and vehicles.

South Australia and Australia showed similar trends in spending on Operation of vehicles per capita, during the period from the September quarter 2007 to the September quarter 2008, when South Australians' expenditure decreased by 3.2% and Australians' expenditure decreased by 3.5%. A decrease in the per capita HFCE on Operation of vehicles during a period of significant increases in fuel costs suggests that people were using their vehicles less during this period.

Operation of vehicles (a), per capita HFCE, Chain volume, Trend

Transport services

The Transport services HFCE expense category relates to fare-paying passenger transport services (e.g trains, buses, aircraft). After a period of increasing HFCE per capita on Transport services between the September quarter 2006 and the June quarter 2007, South Australian HFCE per capita on these services declined after the September quarter 2007. Between the September quarter 2007 and the September quarter 2008, South Australian HFCE per capita on Transport services decreased by 7.0%, while nationally there was a decrease of 0.6%.

Although South Australians decreased their per capita spending on Transport services after the September quarter 2007, HFCE on the Operation of vehicles showed no upward trend during this period (see above) as might be expected if public transport was abandoned for private vehicle transportation.

Transport services (a), per capita HFCE, Chain volume, Trend

Purchase of vehicles

South Australia and Australia showed similar trends in spending per capita on the Purchase of vehicles until the end of 2007. Following its peak in the December quarter 2007, Australian per capita HFCE on the Purchase of vehicles has been in decline and as a result the estimate for the September quarter 2008 is 6.2% below the estimate for the September quarter 2007. Conversely, South Australian per capita expenditure on the Purchase of vehicles increased 6.0% over the same period.

Purchase of vehicles (a), per capita HFCE, Chain volume, Trend

Food

During the period of increasing fuel costs between the September quarter 2007 and the September quarter 2008, HFCE on Food decreased more in South Australia than in Australia. Expenditure on Food in South Australia decreased from $870 per person to $845 per person (a fall of 3.0% over this period). Nationally, however, despite declines in the latest two quarters, expenditure in this category has increased from $781 per person in the September quarter 2007 to $785 per person in the September quarter 2008; an increase of 0.1%.

Food (a), per capita HFCE, Chain volume, Trend

Hotels, cafes and restaurants

For the Hotels, cafes and restaurants category, which includes personal outlays on meals and beverages at catering establishments, South Australia HFCE per person increased by 3.4%, ($521 per person to $539 per person) from the September quarter 2007 to the September quarter 2008, while for Australia there was a 2.5% decrease ($539 per person to $526 per person).

The Health and the Other goods and services expense categories showed quite marked differences between South Australia and Australia for the percentage HFCE per person changes between the September quarter 2007 and the September quarter 2008. However, these categories include the current expenditures of non-profit institutions serving households, such as ambulance services, non-profit hospitals and nursing homes, home nursing services in the Health category and charities, churches, conservation groups, trades unions and professional associations for the Other goods and services category. Thus it is not possible to ascribe changes in the spending behaviour of households as significant contributors to the changes measured for these categories.

SUMMARY

The Automotive Fuel component of the CPI for Adelaide increased by 26.0% between the September quarter 2007 and the September quarter 2008. During the same period, South Australian household final consumption expenditure (in chain volume terms) per person increased by 1.4%, while the corresponding national change was a decrease of 0.1%.

Between the September quarter 2007 and the September quarter 2008, South Australian household final consumption expenditure (in chain volume terms) per person on Purchase of vehicles showed an increase of 6.0%, while this spending category for Australia showed a decrease of 6.2%. Although decreasing expenditure on Transport services during this period, South Australians did not increase their per person spending on Operation of vehicles, as might be expected if they were substituting one mode of travel for the other, but decreased it by 3.2%.